Coryton Oil Refinery

Rebecca Harris Excerpts

Wednesday 27th June 2012 Commons Chamber

[Stephen Metcalfe]

I am afraid that time is limited; I am sorry, but no.

The people I want to thank the most are the staff, the management—particularly Jon Barden and Georgina Clarke—and, of course, the unions. Without their commitment, the business might well have closed months ago. Instead, it had time to search for a buyer and to explore a range of options that might have led to the securing of its long-term future.

The refinery has changed ownership many times over the years, most recently in 2007, when it was acquired by a Swiss company, Petroplus, and became one of a group of five refineries. Unfortunately, in January this year the parent company—Petroplus—got into financial difficulties and filed for bankruptcy, at which point Coryton placed itself in administration with PricewaterhouseCoopers. Of the five refineries, Coryton is far the most complex. It has a Nelson complexity index of 12, making it one of the most sophisticated refineries in Europe. It is very profitable, and I believe that, because of its complexity and its location, it is also of great strategic importance, not least because it provides 20% of the fuel in the south-east and 10% of that in the United Kingdom. However, because of the structuring of the parent company, when Coryton went into administration it had no fuel assets and nothing in its bank accounts, although it did have £2 billion of debt held in bonds that the parent company had issued.

[Rebecca Harris (Castle Point) (Con)]

Must it not be utterly dismaying for the work force of 900 people in what was a very successful and profitable refinery to find that that they are losing their jobs, although the parent company was able to go on leveraging debt against that successful refinery?

[Stephen Metcalfe]

Yes. When the company went into administration, finding that all the debt was leveraged against that one refinery must have come as a shock to all concerned. That just shows the mismanagement of the parent company in Switzerland.

Once appointed, the administrators stabilised the situation and began looking for a long-term solution. Two options soon emerged, although I am sure that many others were investigated: sale to a third party and financial restructuring. The financial restructuring process began very well, but it became obvious fairly quickly that there was a large funding gap and it would not be workable. As for the sale side, PWC invited expressions of interest and numerous possibilities emerged, from lift and shift to sale as a refinery and, finally, sale as a fuel terminal, which would give a fuel company greater access to the Thames and therefore to the south-east. The site has always been considered particularly attractive owing to its close proximity to London and its deep water jetty, but ironically those factors are now to be the refinery’s downfall.

I understand that following examination of the offers, a Russian consortium was identified as having presented the most favourable bid. It wanted to operate Coryton as a refinery, thus saving the 900 to 2,000 jobs that it supports. The next best bid came from a bidder that wanted to operate the site as a terminal. In the light of yesterday’s announcement, many have expressed surprise that no one wanted to buy the site as a refinery. Although I do not possess all the details, I do not believe that that is the case. What I do believe is that a number of credible, sustainable bids were presented, but that none of them ultimately exceeded the bid for an alternative use. I shall say more about that later.

Last month, despite all that hard work, the administrators, PWC, made the announcement—which I think we had all prayed we would never hear—that no credible offer was on the table and no one was willing to operate the refinery, and that therefore it was proceeding towards closure. As I have said, I believe that there were credible offers on the table, but that they were not high enough. Yesterday, PWC struck a final blow and announced that it had done a deal with Shell to operate the site as a terminal. The timing of that announcement—before tonight’s debate—made redundant much of the case that I wanted to build to save the refinery, but I ask the House to bear with me none the less.

As Members can imagine, following that announcement the situation has been very fluid over the last 24 hours. The one thing that has been constant is the contact that I have received from numerous parties expressing deep concern about the way in which the administration has been conducted. They talk of great secrecy surrounding the sale; they say that alternative outcomes could have been explored but were not, and that barriers were put up.

Following yesterday’s announcement, I have a better understanding of the events that led up to it, and I think it important to examine those events. My current understanding is that the Russian-led team bid the highest amount, and that the bid was proceeding well until something happened. I have no idea what that something was. I have a number of notions, but I cannot confirm any of them. Whatever happened, however, the upshot—so I am told—was that that information was not communicated properly by the administrators to the buyers. I have to say I find that extraordinary—although in light of my own experiences, not surprising. I still have not been officially informed by PWC that a deal has been done. Although I have attended every stakeholder meeting, I found out yesterday, when the press contacted me—although I did subsequently have an e-mail from one of the partners, Vopak.

[Stephen Metcalfe]

It is difficult for me to speculate about what might, or might not, have happened and what discussions might have taken place, but I will say that more than one company has been in touch with me.

I find it extraordinary that the administrators, charged with getting the best deal for the bond holders—to whom, after all, they are responsible—did not inform the company with the largest bid at the time that there was some problem or the situation had changed. Perhaps if things had been different and if communications had not broken down, we might have been in a different position. I do not know what happened, but the upshot was that the bid was dropped. I believe that at that point trust broke down between the administrators and the Russian consortium wishing to buy the refinery. For the record, I have been aware for some time that both parties in this main bid were represented by PWC and while I make no comment about the existence of a Chinese wall I would be very interested to hear how both sides view the behaviour of the other, bearing in mind they were both from the same firm.

As I said many times in the run-up to yesterday’s announcement, there has always been another bidder. I am concerned that it might not have been given a fair crack of the whip. I do not know whether that is true. This is a complex situation and I do not pretend to have the expertise required to pick through the detail and assess the quality of the arguments, from both sides, about what happened.

[Rebecca Harris]

Is it not crucial that we get to the bottom of this for the sake of all the people who will be losing their jobs, as well as other people in the supply chain? We need to know what went on, and that everything possible was done.

[Stephen Metcalfe]

I entirely agree. There could have been a different outcome if there had been more openness and transparency on all sides. I do not attribute fault to anyone, but these events need to be looked at. That different outcome could have been more beneficial to the bond holders, but my primary concern is, and will continue to be, for the work force who will pay the price for this breakdown in communications.

For those unfamiliar with the refinery, I want to put it in historical context and explain its local importance. South Essex has a long and proud industrial heritage. At one time there were three refineries along the Thames. After PWC’s announcement, there will be none. When we talk about this refinery closing, we are not talking about just another business that got into trouble and failed to meet the challenges of the modern world. On the contrary, it was a very profitable business. It met the modern challenges. It was part of our collective DNA in south Essex. It was part of the very fabric of society there; people moved to work there. If it goes, the economic blow will have the biggest impact, however.